NEW DELHI: Banks will monitor merchants to ensure that the Merchant Discount Rate (MDR) on UPI transactions is not passed on to consumers, news agency ANI reported citing government sources on Thursday. Further, they said that not a single penny from MDR will come to government, rather it will be shared with UPI ecosystem, including banks.The Indian Banks’ Association (IBA) is expected to put in place a mechanism to ensure that merchants do not recover MDR from customers. The finance ministry will hold discussions with the IBA on the UPI issue and separately meet merchants and the Confederation of All India Traders (CAIT) to discuss the MDR-related concerns.The IBA will also launch an explanatory campaign in regional languages to create awareness among consumers about MDR and UPI payments.Meanwhile, the GST council is likely to take a view on the applicability of GST on MDR.The new MDR framework is set to take effect from October 15, 2026, with regular UPI merchant transactions above Rs 2,000 attracting a 0.4% charge.The MDR will be capped at Rs 300 for transactions of Rs 75,000 or more. For instance, a merchant receiving a single UPI payment of Rs 6,000 would incur an MDR of Rs 24.However, the current framework does not prescribe a separate daily limit on repeated UPI payments to the same merchant. This could allow a customer to split a larger payment into multiple transactions of Rs 2,000 or less, potentially avoiding MDR. For example, instead of paying Rs 6,000 in one transaction, a customer could make three separate payments of Rs 2,000 each.